Medicare+Choice Problems Chasing Away 58 Health Plans

Medicare+Choice, the program that was supposed to ease the elderly into managed care, is itself suffering from the uneasiness of HMOs dissatisfied with payment rates. Fifty-eight health plans will drop out of the program or reduce service territory on Jan. 1, forcing about 536,000 people either to find other managed care plans if available in their areas, or to go back to traditional Medicare. Of the 58 plans, 22 are withdrawing entirely.

This year, about 934,000 people lost their Medicare+ Choice coverage.

"We have a program where costs are outstripping reimbursement 6 to 1," Karen Ignagni, president of American Association of Health Plans, tells Congress Daily.

She adds that if not for Medicare "givebacks" that increased payments to hospitals and insurers over the last two years, regulatory changes implemented by the Bush administration, and "promises of further relief," more plans would have dropped out of Medicare +Choice.

Those "promises of further relief" must be what's fueling federal officials' optimism regarding the program. The latest data show that the number of enrollees dropped from 6.3 million in 2000 to 5.6 million by June 2001. (See "Managed Care Outlook")

Meanwhile, in the short term, the program continues to hemorrhage. The New York Times reports that the largest Medicare+Choice organization, PacifiCare, will drop 64,000 beneficiaries in California, Texas, and other states.

The paper also says that ConnectiCare will pull out of two counties in Connecticut, affecting almost 25,000 beneficiaries. Aetna U.S. Healthcare will drop 38 percent of its 277,000 Medicare beneficiaries, many of whom live in New Jersey and Pennsylvania.